Serbia Nears Cabinet Revamp, Top Party Repeats Early Poll Threat

Aug. 29 (Bloomberg) -- Serbia’s main ruling parties moved
closer to overhauling the cabinet even as a dispute over
policies needed to shore up the European Union aspirant’s
dwindling finances raised the prospect of early elections.

Lawmakers voted to split the Finance and Economy Ministry,
opening the way for a shuffle of Prime Minister Ivica Dacic’s
administration after he and Deputy Premier Aleksandar Vucic
ejected Mladjan Dinkic, who ran the ministry, and his party from
the government last month.

With his Progressive Party leading opinion polls, Vucic is
pushing for spending cuts to reduce the budget deficit and win a
new lending agreement from the International Monetary Fund.
Dacic’s Socialist Party and its Pensioners Party allies argue
more spending will help Serbia recover from two recessions in
the past three years. They oppose cuts to retirement payments
and public salaries, a stance Progressive economic policy
coordinator Milenko Dzeletovic said may kill the coalition.

“We will have early elections” if any coalition partner
“halts the reforms we plan to implement,” Blic newspaper cited
Dzeletovic as saying today.

Serbia’s borrowing costs are above the 7 percent threshold
that triggered bailouts in the euro area, putting pressure on
the government which needs between 1.6 billion euros ($2.1
billion) and 1.7 billion euros to get it through the end of the
year, former central banker and finance ministry adviser Milojko
Arsic told Bloomberg this week.

Shuffle

Even though Vucic is the dominant figure in government, he
will let Dacic keep the prime minister spot, party official
Slavica Djukic-Dejanovic told NIN magazine on Aug. 15.

Dacic’s Socialists revealed the names of new candidates for
the revamped cabinet, including Socialist Party executive board
chief Branko Ruzic as minister without portfolio for European
Union integration and Belgrade deputy mayor Aleksandar Antic as
transport minister.

Vucic has tapped former McKinsey & Co. associate Lazar
Krstic, to be the new finance minister and asked former
International Monetary Fund head Dominique Strauss-Kahn and one-time Austrian chancellor Alfred Gusenbauer to be advisers.

Last week, Krstic said budget deficit must narrow to 4
percent of gross domestic product from an estimated 6.5 percent
this year and adopt a 2014 budget for Belgrade to qualify for a
$250 million loan from the World Bank, magazine NIN reported.